What Is Ethereum Cryptocurrency? | Beginner’s Guide For Ethereum

In the world of Cryptocurrencies, it is believed that “if Bitcoin is the King, then Ethereum is the queen”

Ethereum is a new development which is also a type of cyptocurrency which is built upon blockchain technique and is currently the second most valuable cryptocurrency on the market. Before jumping straight into Ethereum, let’s discuss about Cryptocurrencies and blockchain first.

A ‘Cryocurrency’is a virtual currency which has an encryption technique (encryption is a private – key cryptography which has converted from a readable form to an encoded version for security purpose).

‘Blockchain’ works as a platform which enables cryptocurrencies to be exchanged digitally. It clears the way for a secured online transaction by recording transactions across many computers so that the record cannot be altered afterwards.

To know more about the blockchain technology and how bitcoin works – Blockchain

What is Ethereum

Ethereum was introduced in the year 2015 by Vitalik Buterin with an effort to transform the internet entirely. Ethereum is an open – source platform which is based on a blockchain technology. It is also a decentralized smart contracts platform which is powered by a cryptocurrency called ‘Ether’.

‘Ether’ is like other cryptocurrencies which also uses shared digital ledger which records all the ether transactions, which is also known as blockchain and it is created through the process of mining.

The work of the miners is to verify the bunch of ether transactions to form ‘blocks’ and secure them cryptographically by solving complex algorithms. And each time a new block is added to the chain of previous blocks, the miners earn themselves a ‘block reward’. And these miners can inject their block rewards directly into the market.

How does Ethereum Works

Ethereum Blockchain is kindred with Bitcoin. However, it uses software for its programming language which is known as ‘Smart Contract’.

A ‘Smart Contract’ is also known as cryptocontract, which is a computer program which controls the transfer of digital currencies or assets between parties under certain conditions. It not only defines the rules and a penalty around an agreement just like a traditional contract does, it also automatically enforces these obligations. It does this by taking in information as input, assigning value to that input through the rules set out in the contract and executing the actions required by those contractual clauses.

Benefits of Smart Contracts

Read below to know few benefits of smart contracts, which are as follows:

They provide the user full control by cutting the middleman which also minimises extra costs

Through Smart Contracts, the participants can see market activity as they are recorded, encrypted and duplicated on the public blockchain

They had put an end to the time and effort required to manually process documents

Difference Between Dapps and Smart Contracts

Smart Contracts are somewhat similar with decentralised applications or Dapps. However, there are few key differences are there between the two which are as follows:

Dapp is an interface that connects a user to a provider’s service via decentralized peer – to – peer network. However in one hand where Smart Contracts requires a fixed number of parties to be involved, Dapps have no limits on how many can participate at any given time.

Dapps can also be used for other purposes as they are not confined to financial uses only

How is Ethereum Different From Bitcoins

Both Ethereum and Bitcoins are blockchain based cryptocurrencies. However, there are differences in both the sought – after cryptocurrencies which are as follows:

Ethereum

Bitcoins

Value

$ 88 Billion (according to sources it has same value as Unilever)

$ 143 Billion (according to sources it has same value as Starbucks or Walgreens)

Launch

2015 and a recent venture into the world of cryptocurrencies

2009 and consider to be the first true cryptocurrency

Transaction time

10 Minutes

12 Seconds

Blockchain

Capable of storing computer code, applications, that can use the CPU power going into the network to execute

Database of accounts or wallets with an amount of currency stored in each

Reward

Ethereum reward miners based on its proof – of work algorithm called Ethash, with 5 ether given for each block

12.5 bitcoins after mining bitcoin halves about every four years

As per the sources, Ethereum has a market share of 27 per cent and has been traded publicly since 2016. Also issuance of Ether has been limited and the relative inflation rate would decrease every year with rising demand.